Report Finds 84% of Lat Am Fintech Leaders Believe More Companies Will Embrace Open Finance in 2021

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The impact of Covid-19 is speeding up the adoption of digital financial services and this will positively impact the consolidation of Open Finance models in 2021, according to a report published by Belvo, a financial API platform in Latin America

For their Open Finance Trends Report, Belvo surveyed over 150 professionals in the Latin American fintech sector and interviewed nine industry and regulatory experts, including representatives from Visa and Mastercard, Mexico’s CNBV, and fintechs like Ualá and Mobills.

The results of this report point at an accelerated demand for digital financial services in Latin America. The need for social distance has pushed millions of users to shop online, pay their bills, or access their banking accounts digitally for the first time. And experts believe that these new digital habits will remain: 96.4% think that Covid-19 will increase the digitalisation of financial services. Almost half of them (47.3%) think that payment providers will be the more affected segment of the industry.

As a result of this increased demand for digital financial services, most professionals (84.3%) believe that 2021 will see a surge in the adoption of Open Finance models. This growth will be driven by several factors: such as a more favourable regulatory environment (particularly in Mexico and Brazil) and more visibility about its benefits among end-users and companies.

While 38.4% consider that regulation remains the biggest challenge, 90.2%  think that companies should get ahead of it and start making moves for its implementation.

Technology providers, such as Open Finance API platforms, will help build the necessary infrastructures to make it a reality, facilitating a smooth transition to this new scenario.

A maturing ecosystem

Emerging non-traditional players –like fintechs, big techs, and gig economy platforms–, will increasingly invest in this new ecosystem. Either by forging alliances with financial institutions or by building their ecosystems with embedded financial services, these players will help consolidate the popularity of these new business models.

The growing maturity of the fintech ecosystem during 2021 will also lead to the development of new and more sophisticated use cases based on Open Finance. Beyond accessing raw data, companies will be able to add an extra layer of intelligence to their businesses to improve decision-making thanks to data enrichment solutions; as well as offering instant payment solutions through APIs directly within their apps.

Lending companies will be the ones that will benefit the most from these new data-sharing models, according to 40% of professionals, followed by firms specialised in credit scoring (22.3%) and personal finance management tools (18.8%).

Alternative data sources will increase financial inclusion

Access to enriched data is considered the most relevant benefit of implementing Open Finance models, according to 32.1% of professionals. And a majority (93.7%) believe that using new alternative sources of data will help create better financial products in 2021.

Experts agree that this will lead to the development of more tailored and relevant financial products that will reach people who have not yet been banked or are nowadays underserved by traditional entities. Gig economy platforms are one of the sources of alternative data that will become increasingly relevant to build more inclusive financial products as these platforms have seen a surge in the employment of independent workers to fuel increasing demand.

“Becoming a key driver of the Open Finance movement is at the core of our mission at Belvo to power the next generation of financial services in Latin America. By allowing the flow of financial data from banking and alternative sources to be easily and securely shared with others and by generating insights on top of that data, it is possible to create a more modern and inclusive financial system. One where users can access the services they truly need at the best possible rates, and with the freedom to choose from a wider range of possibilities,” said Pablo Viguera, Co-Founder and Co-CEO of Belvo

https://thefintechtimes.com/report-finds-84-of-lat-am-fintech-leaders-believe-more-companies-will-embrace-open-finance-in-2021/